Green Retirement

For most Americans, their house, is their largest retirement asset. One of the biggest questions in retirement planning involves - “What to do about the house?” If you live in your house, it is an asset, that produces negative income. Besides the place where you live, a house is also an investment, just like a stock or a bond. Your house is part of your net worth, it’s appreciation or depreciation, will have an impact on your wealth.

When it comes to retirement planning, and your house, you have four options to consider.

Sell the House:

There are several reason why you may need to, or wish to, sell your house before or upon retirement. A house is an asset whose value rises and falls, but if you live in your house, it is an expense which does not provide income.

You need the equity in your house to fund your retirement.
You plan on moving when you retire.
You believe the long-term outlook for housing is negative.

Rent the House

Another option is to rent your house, become a landlord, and use the rental income to fund your retirement.

You believe the long-term outlook for housing is positive.
Your house is located in a strong rental market.
You are unsure about re-locating and want to be able to return.

Reverse Mortgage

Reverse mortgages are a relatively new option for retirees. Although at first glance, they may appear to be an attractive option, reverse mortgages do carry risk and should be researched thoroughly.

You do not want to move, when you retire, but you need to generate income from your house.

Do Nothing

Their is no rule that says you must move when you retire. You may be very happy, in your house and community, and see no reason to leave. Sixty percent of Canadians, according to this article, plan to stay put once they retire.

Your house is paid off.
You have sufficient income, beyond your house equity, to fund your retirement.
Appreciation or depreciation, in the housing market, will not effect your retirement security.

Which housing retirement planning option is best, depends on your situation, and in three of the four options on your prognostication of future housing values in your market. Two researchers from the University of Southern California, believe that housing values are in a long-term decline, their research concludes that we are at the beginning of a “Generational Housing Bubble.” The San Francisco Chronicle had a recent article, explaining their findings and how their theory will affect specific housing markets across the U.S., the link to the article is here.

One more important point to make about housing and retirement. Traditional retirement planning does not include your house in their asset allocation models. Perhaps your largest investment, and the impact it will have on your portfolio is left out. Green Retirement Planning includes your house, and all of your other assets, in it’s asset allocation model.

Learn more about Green Retirement Planning - and how it can save you hundreds of thousands of dollars, allow you to retire early, and help save the Planet.